 Hello and welcome to this session. This is Professor Farhad. In this session, we would look at journalizing and posting. This topic is covered in introductory financial accounting course and it's helpful if you are basically starting to study for the CPA exam. As always, I would like to remind you to connect with me on LinkedIn if you haven't done so. YouTube is where you would need to subscribe. I have 1,600 plus accounting, auditing, finance and tax lecture. This lecture goes under financial accounting, but I do cover other accounting courses. If you like my lectures, please like them. Click on the like button. It doesn't cost you anything. Share them with others. If you're benefiting, it might benefit other people. Please connect with me on Instagram. On my website, you'll have resources to additional materials such as PowerPoint slides through false multiple choice. If you're studying for your CPA exam, 2,000 plus CPA questions, check it out. So the first thing we're going to go over is the double entry accounting system and the T-account that we learned about in the prior session. So if you don't know the T- accounts, go back to the prior session and look at the T-account. Otherwise, you're going to be confused. But let's go ahead and review. We have assets, the increase on the debit side, the reduce on the credit side, liabilities, the increase on the credit side, common stock increase on the credit side. I told you to cross out the debit side, dividend increase on the debit side. You can cross out the credit side for now. Revenue increase on the credit. You can cross out the debit. Expenses increases on the debit and you can cross out the credit. And also I talked about the normal balances for each account and I said the side that the account increases on is also called the normal balance and this is where we put the balance for the account. It's the same side. Now I have almost a 15-minute recording explaining this equation. This is just a review for the people who viewed it. But if you haven't viewed it and you want to know all about this, so view the prior session. Now the first thing we're going to learn is how to journalize. So this is a general journal that's empty. This is a general journal that's empty. So the first, let's assume you are giving a transaction where the owner invested money in the business. So the owner invested $30,000 cash in the business. Now what did you learn in chapter one? You learned that cash will go up by $30,000 and common stock will go up by $30,000. Now what we're going to do, we're going to look at a T account. Well, if cash goes up, it means we debit cash $30,000 because cash is an asset and cash is going up. Common stock, when common stock going up, common stock will take a credit. Total debits equal total credits $30,000 equal to $30,000. Now how do we journalize this transaction? The first thing is we post the date and the ledger. This transaction took place December 1st. Second, the account that's being debited listed first. In this transaction, cash is being debited. Cash is listed first. Cash debit $30,000. The account that's being credited is listed next and we indent a little common stock. Then we put the title of the accounts and we credit common stock $30,000. Then we post the debt. Make sure the debits and the credits equal to each other. Then we post an explanation, received investment by the owner. So this is the first transaction. This is how we journalize. Let's look at the second transaction. It took place on December 1st. We bought supplies for cash. So supplies went up. Supplies is an asset. We debit supplies and we credit cash because cash is going down. Supplies is listed first because supplies is the account that's being debited. Now we're going to learn to practice those transaction. This is just an overview. So those are the general rules. Let's go ahead and practice more questions to see how we journalize. After we journalize, we post to the ledger. So what is posting to the ledger? Well, this is what a ledger and each account has a ledger. This is the cash ledger and it's the cash is number 101. Here's what's going to happen. On December 1st, we received $30,000 in cash. So this is the cash ledger. So this is like the T account. Notice this is the T account. You have a debit column and credit column. And this is on the side we have the balance. This is the balance. So if I receive $30,000 cash, how much cash do I have? $30,000. So that's my balance now. On December 2nd, I paid $2,500 cash. Therefore cash is credited. What's my balance in cash? My cash went down. My balance is $27,500. On December 3rd, I paid $26,000 cash. So my cash went down, gets credit. What's my balance now? $1,500. On December 10th, I received $4,200. What's my new balance? $5,700. So this is keeping track of my running balance. Now this is only a cash ledger. Each account will have its own ledger and we're gonna see this in form of T account. So we're gonna have a T account for each account. And we're gonna see this when we work the example next. So this is a running balance. So what we need to do is this. You remember this transaction we journalize? We debit the cash, credited, common stock. After we journalize, we post to the cash ledger. If we debit at cash, the same date, we bring down the date to the cash ledger December 1st. And if we debit at cash, we're gonna debit cash. Therefore we debit cash $30,000 and this is the T account for cash. Now the balance is $30,000. Since we credited common stock, again, we bring down the date, common stock December 1st. Since we credited common stock, we're gonna credit common stock and the balance in common stock is $30,000. Again, this is the T account for common stock. So we're keeping track of the T account for common stock. We're keeping track of the T account for cash. Now when we go ahead and we go through the entries, I'm only gonna show you the T account. I'm not gonna show you the balance because this is an official general ledger. We're just gonna work with the T account. Now, a few things you wanna know on this slide. So this way you kind of move ahead. One is each general ledger has an account. For example, cash is 101, common stock 307. And we talked about this in the prior session. Those are the chart of accounts. Now, what we do after we posted the ledger, after we take this $30,000, bring it down here. What we do is we write here PR post reference 101. What is 101? It's this number here. Why do we put 101? To indicate that this $30,000 was transferred. Now, in this column we put G1. What is G1? It means this is general journal page one. So this 30,000 coming from the general journal page one. So notice for common stock also coming from J1 and the account number is 307. So after we post, we go back here and we put number 307. This is what the PR is post reference. That's all what it is. Now we're not gonna be using those because it takes a lot of time to do the post reference. In the real world, this is done automatically. What we're gonna go over is the general journal, journalizing transaction. We're gonna start from the beginning. We're gonna identify the transaction from any source document. We're gonna analyze it as we did in the prior chapter, record the transaction in the journal entry, applying the double entry accounting, the debits and the credits, and post the entry for simplicity. We're gonna be using the T account to represent the ledger. So when I said, you know, this is the ledger, you're gonna see it's a T account. And I just showed you that the ledger is a T account, except the formal ledger will have the running balance on the side. For our purposes, we don't have a running balance. We have to compute the running balance ourselves. So starting with the first transaction, first we are going to analyze the transaction. Fast forward receive $30,000 cash from Chase Taylor in exchange for common stock. What did we learn in prior session? We learned how to analyze this transaction. We learned that cash went up and common stock went up. Now we need to look at it from a T account perspective. So from a T account perspective, the two accounts affected are cash and common stock. So this is the cash account and this is the common stock account. Cash is going up. If cash is going up, I'm gonna debit cash because when cash goes up, cash is an asset, cash is gonna go up. I'm gonna credit common stock, also common stock going up, I credit common stock. Now I journalize, I debit cash, 30,000, I credit common stock, 30,000. Now technically, you journalize, then you post. What I'm doing, I'm using the general ledger as the T account, okay? But you journalize, debit cash, credit, common stock. So simply put on the side, you do this T account cash, you do this, you put okay cash, common stock, 30,000, 30,000, then you journalize, then you post. But I'm using the general ledger on my side T account, okay? So now if I ask you, what is the cash balance? The cash balance is 30 debit balance. What's the common stock? The common stock is 30,000. So we just journalize and we post it to the ledger. Transaction two, fast forward pays 2,504 supplies. Well, if I paid cash, cash is gonna go down and supplies gonna go up. This is what I learned when I analyzed the transaction. Now I need to take this information and turn it into a T account. Well, if I increase supplies, supplies is a debit, supplies is an asset, I debit. If I reduce cash, cash is a credit. So this is the 30,000 is from the prior balance, from the prior entry, from the prior transaction. So if you see those, so only look at the red ones from the prior transaction, okay? So what I'm gonna do, I'm gonna debit supplies and the general journal and I'm gonna credit cash in the general journal. Now, if I ask you, what is the balance in the cash account? Well, I started with 30,000 and I paid 2,500, my balance is 27,500, my balance in the supplies 2,500. Let's take a look at this transaction. Fast forward pays, pays cash, 2,600 for equipment. So we gave cash, they gave us equipment. Cash will go down, equipment will go up, they're both assets. So cash will go down, it's a credit, I'm gonna credit cash and debit equipment. So on the side, I do this. Debit cash, credit equipment, now I journalize. I debit my cash in the general journal and I credit my equipment in the general journal. Now, what's my balance in cash? My balance in cash went down by 26,000. So my cash is 1,500, my equipment is 26,000. Let's take a look at this transaction. We purchased 7,100 of supplies on credit from supplier. Well, I have more supplies, but I have more accounts payable because I bought them on credit, I did not pay cash. So supplies going up as an asset, I debit supplies 7,100, accounts payable is a liability. I have more accounts payable, I credit accounts payable. So I debit my supplies and I credit my accounts payable, that's the general journal. Now if I ask you, what is the balance in supplies? It is 9,600 and you're gonna see later on that we're gonna reduce supplies when we use them. And what's my balance in accounts payable? 7,100, you're gonna see later on when I pay my payable, it's gonna go down. But right now I owe 7,100 and I owe it the staples. So this way we make it a little bit realistic. Fast forward, provide consulting services and immediately collect 4,200 cash. What did we learn earlier when we analyzed this transaction? We received cash because we generated revenue. So cash will go up, revenue will go up. So cash will go up, cash takes a debit, I'm gonna debit cash, revenue always go up, will take a credit, 4,200 credits. So I'm gonna debit my cash, credit my revenue. Now if I ask you, what is the cash account? Cash account went up by 4,200 from the prior balance. So we add up all the debit, add up all the credit, take the difference. What is my consulting revenue? My consulting revenue is 4,200. Transaction six, fast forward pays 1,100 cash for December rent. Why did I pay the cash for December rent? So my cash is gonna go down, my rent always go up. My cash is gonna go down and my rent expense gonna go up. Rent expense always go up and always takes a debit. So I'm gonna debit rent expense and I'm gonna credit cash. So I'm gonna credit cash, debit rent expense. This is going down and this is going up. So I'm gonna debit rent expense in the general journal and credit cash. What's my balance and rent expense? A thousand. What's my balance in cash? It's this amount minus this amount and the answer will be here. Transaction seven, more payment of expenses. Pay 700 cash for employee salary. My cash is gonna go down, my salary expense gonna go up. So this is going up, this is coming down. Well, salary expense always take a debit. So I'm gonna debit salary expense, I'm paying cash, cash is credited. Again, the journal entry, debit expense, credit cash. Transaction number eight, fast forward provide consulting services that's good of 1,600 and rent its facilities for 300. The customer is billed 1,900. Now we did more work, we did two type of work. We did some consulting work worth 1,600 and we rented some equipment to someone for 300 for the same client. So in total, we have revenue of 1,900 and fortunately the customer did not pay for the revenue. The customer build us, I'm sorry, we build the client. They did not pay, we build them. Therefore, we're gonna have account receivable that's gonna go up because we receive the promise to be paid in the future, which is an asset. Consulting revenue always go up, revenue always go up and rental revenue goes up. Now from a T account, account receivable is an asset. So I'm gonna debit account receivable. I need credit of 1,900. So I credit consulting revenue 1,600 and I credit rental revenue 300. Now I just need to do the journal entry. I debit account receivable, credit and credit revenue. Now if I ask you, what is the balance in account receivable 1,900? What's the balance in consulting revenue 5,800? What's the balance in rental revenue 300? Those are the balances. Transaction nine, receipt of cash on account. Fast forward receives 1,900 cash from the client billing in eight. Well, this client pays really quick. We billed them here. This is when we billed them. Now they paid the bill. If they paid the bill, they paid the bill with cash. Cash will go up, account receivable will go down. They're both assets. If cash goes up, I'm gonna debit cash. Account receivable is an asset, it's gonna go down. Now my balance in account receivable back to zero. Now they don't owe me anything. And this is the entry. I debit cash, credit account receivable. Transaction 10. Fast forward pays, we set staples where the company was called Caltech Supply 900 cash toward the payment in transaction four. The payment in transaction, what we did in transaction four, payable in transaction four, not payment. We bought 7,100 of supplies on credit. Now we paid 900. Our cash will go down and our accounts payable will go down. They both go down. So cash will go down, takes a credit. And accounts payable go down, takes a debit. So I'm gonna debit my accounts payable and credit my cash. Now if I ask you, what is the balance in accounts payable? So how much do I still owe? Well, I still owe 6,200. What's my balance in cash? You add up all the debits, add up all the credit, takes the difference and the difference is a debit. And this is the journal entry. I debit accounts payable, credit cash. Transaction 11. Fast forward pays 200 dividend. Well, what did I learn when I analyze this transaction? I learned that cash goes down because I paid cash. Why did I pay cash? Because of dividend, dividend goes up. So cash goes down. Dividend always go up like an expense, but dividend reduces equity. So dividend is part of my DEA. Dividend is increase on the debit, cash reduce on the credit. Let's journalize. I'm gonna debit dividend and credit cash. Exactly what I did here. Debit dividend and credit cash. What's my balance in dividend? 200. What's my balance in cash? Add all the debit, add all the credit, take the difference and it's a debit balance. Transaction 12. So this is a new transaction. Fast forward received $3,000 cash. Cash will go up in advance of providing consulting services. We received this money in advance before we did the service. When we received the money before we do the service, we're gonna have something called a liability called unearned consulting revenue. Unearned means we have not earned the money. We have the money, but we haven't earned it. Therefore, it's a liability. So cash is gonna go up. Cash goes up on the debit. So I'm gonna debit my cash. Unearned consulting revenue is a liability. Liability goes up on the credit too. I credit liability. So by accepting the 3,000 cash, we have an obligation to perform. This obligation to perform is called a liability. Now you're gonna see later on this liability will go down. When does it go down? When we perform the work. And we're gonna see this later on. So we're gonna debit cash, credit consulting revenue. Debit cash, credit consulting revenue. Transaction 13, fast forward pays 2,400 cash. Cash will go down. Insurance premium for 24 month. Insurance coverage start December 1st. If I pay cash, cash is gonna go down. What did I pay cash for? For insurance. Now I paid in advance for two years. This is called the prepaid insurance. So this is a prepaid. Prepaid are assets, okay? So cash is gonna go down. Prepaid, this is an asset. Asset goes up by a debit. Asset goes down by a credit. Cash goes down. Now what's my balance in prepaid? My balance in prepaid is 2,400. And what did I say about the prepaid earlier in a prior session? That prepaid eventually go down and they turn into an expense, which we'll see later on, okay? So this is the journal entry. I debit prepaid, credit cash. Transaction 14, I purchased supplies for cash. So I used cash to buy supplies. What's gonna happen to my cash? It's gonna go down and my supplies is gonna go up. Supplies will go up on the debit because supplies is an asset and it's going up. Now I have more supplies. Cash is an asset. It's gonna go down. It goes down on the credit. Now what's my balance in supplies? 7,220, that's 7,000, 7,720, if my math is right. No, it's more than that. It's 9,600, 9,720, 9720. So my balance in supplies, 9720. What's my balance in cash? Add all the debits, add all the credits and the difference is that. So I'm gonna debit supplies, credit cash. Payment of expense in cash. Fast forward pays $305 for the December utilities. If I paid cash, cash goes down. If I paid for my utility expense, expenses go up. Cash goes down, expense goes up. I debit expenses because expenses always go up on the debit and since cash going down, I credit cash. I debit expense, credit cash. What's my balance in utilities? 305, what's my balance in my cash? Add all the credits, add all the debits and the difference is a debit. Payment of more expenses in cash. Pay $700 cash in employee salary for work performed in the later part of December. I paid cash, cash will go down for an expense, expense goes up. Expense takes a debit, now my salary's expense so far is 1,400, 1,400, 1,400 and I paid in cash, cash will go down once again. If I add up all my debits, subtract my credit, the balance in cash will be a debit. So I debit expense, credit cash. And this is a summary for all the balances. So after I add up all my debits, add up all my credits, the balance in cash is 42.75. The balance in account receivable, zero debit balance, the balance in supplies, 97.20. The balance in prepaid, 2,400. The balance in equipment, 26,000. All these balances are debit balances because assets increase on the debit and they will have a debit balance. Liabilities accounts payable, 6,200 credit, unearned revenue, 3,000 credit total, credit total balance of, total liabilities of 9,200. Common stock, a credit balance, dividend debit balance, consulting revenue, 5,800 credit, rental revenue, 300 credit, salaries expense, 1,400 debit, rent expense, 1,000 debit, utilities expense, 350. If I add up common stock, minus dividend, plus revenues, minus expenses, will give me equity of 33,195. Liabilities plus equity should equal to your assets. Now what we do, we take this information, the ending balances and we're gonna prepare a trial balance. In the next session I will discuss this trial balance but all the numbers from the trial balance, now you know they're coming from the general ledger for each account. There's a debit column, there's a credit column. And this is what I'll pick up next session, talking about the trial balance and the financial statements. As always, I would like to remind you to visit my website if you're interested in additional resources and you're studying for your courses or especially if you're studying for your CPA exam. You're gonna study for your exam once, it's a lifetime investment. Visit my website, study hard, accounting is worth it. Good luck.